One month after it signed a Petroleum Agreement with ExxonMobil, the Ghanaian government is being called on to defend its contents as well as a decision to enter a contract outside of the country’s procurement system.
On January 18, the government of Ghana granted ExxonMobil exploration and production rights for its Deepwater Cape Three Block a 336,000 acre block located 57 miles off the coast its western region. The company is expected to start its exploration activities fully after Parliament ratifies the deal.
The Ghanaian News Agency (GNA) reports that under the agreement, Exxon will carry out the work programme as operator and hold 80% of interest while the Ghana National Petroleum Corporation (GNPC) will hold 15%. The final 5% will belong to a Ghanaian company which Exxon and the government will identify.
Government is also expected to receive 10% in royalties.
The Minister of Energy Boakye Agyarko is quoted as describing the deal as the “best” compared with those the government presently has with other oil companies.
“It is a culmination of key lessons we have learnt as an industry in just over 10 years since Ghana first discovered oil and gas in commercial quantities,” GNA reports the minister as explaining.
Another news agency, Citi Business News, said that ExxonMobil’s investment in the oil sector becomes the first major one in Ghana following a landmark ruling in relation to the maritime border dispute between Ghana and Ivory Coast, in September last year.
The apparent victory by Ghana gives the country an appreciable reputation among the global oil giants, which the minister reportedly explained “is set to trigger further investments in the short to medium term.”
“Exxon Mobil is coming in with the highest standard of safety, financial accounting and all that we need to get done as a country…we have received a lot of expression of interests from other major players; the BP, Shell, Chevron, among others. All of them are now coming to operate in Ghana,” he reportedly stated.
However some analysts in the local energy industry have raised concern over the Energy Minister’s failure to subject the contract to competitive bidding as spelt out in the country’s Petroleum Exploration and Production law.
Though the Minister has argued that that the negotiations with Exxon started before the passage of the law in 2016, Co-Chair of the Ghanaian Extractive Industries and Transparency Initiative, Dr. Steve Manteaw, accused the government of circumventing the law by signing an oil exploration deal with ExxonMobil.
Agyarko had argued that “ExxonMobil started its program of operating in Ghana before the passage of the E&P law was passed in 2016 as such the law could not take a retrospective effect…There were four issues which put the negotiations into abeyance; they bordered on the treatment of foreign exchange, tax issues, among others. When we came in in 2017, the company approached us again and expressed their interest to revive the negotiations with the country but outlined the need to work around the issues so it could pave the way for their operations”.
Manteaw however insisted that there was no excuse to violate the laws of the country.
“Negotiators may have started long before the law was passed, but to the extent that it was not concluded once the law was passed, they must be subjected to the law. Even though the law provides for a situation of this nature, we are yet to be convinced about what is really special about their circumstance that really warranted the direct negotiations,” he is quoted as arguing before noting that common sense should have compelled the government to opt for a competitive bidding process in the interest of best practice and efficiency.
“Even if the law did not require open competitive bidding, common sense suggests to us that open competitive bidding and international best practices suggest that open competitive bidding was the way to ensure optimal returns in the negations of contracts.”
Others disagree with this analysis. The Deputy Minister of Energy, Mohammed Amin Adam is quoted as arguing that the Civil Society group was being selective in its contentions. According to Adam, GEITI is focusing on the section of law which calls for public tender and ignoring another which provides that “the Minister may, in consultation with the Commission, determine that a petroleum agreement may be entered into by direct negotiations without public tender, where direct negotiations represent the most efficient manner to achieve optimal exploration, development and production of petroleum resources in a defined area.”
Other objections to the contract have come from a Professor of Law at the University of Ghana Law Faculty, Raymond Atuguba, who has warned that Ghana could be shortchanged if the Parliament ratifies the agreement without recourse to due diligence.
He argued that, the Parliament has not been thoroughly effective in carrying out its oversight responsibilities, hence the need to critically examine the agreement.
His concerns were raised as part of a two-day workshop on the Ghana-ExxonMobil Petroleum Agreement sponsored by the German Development Cooperation (GIZ), in partnership with the Institute of Financial and Economic Journalists (IFEJ), at Akosombo in the Eastern Region.
The professor argued that there was limited transparency in the agreement, and also decried Ghana’s 15% shareholding, whereas a yet to be identified Indigenous Ghanaian Company (IGC) is to have 5% shares.
He further proposed amendments of some aspects of Ghana’s legal regime governing the signing of oil contracts with multinationals. According to him, the Energy Minister’s limitless powers on managing the oil resources undermines the 1992 Constitution that set up the Petroleum Commission.